How to play with FMCG this year?

Since the news of Stake rise by Anglo-Dutch company Unileaver  PLC is ready to pump some +19K crores which is roughly around 67%. The FMCG market had a hard time; slowdown, high cost, profit margin, rupee depreciation, had affected almost all FMCG stocks. We have seen a consolidation of HUL stock from last June-July even FMCG stock have seen consolidation from September 2013.

FMCG CNX Analysis

 Currently CNX FMCG is just below 200DMA and trend-line is standing as a support. There is a possibility we may see a reversal. Stake rise is not only a problem with HUL, many foreign companies are rising stake in major FMCG companies like Pepsico, GSK and few  in other subsidiaries. It was basically a result of 

SEBI’s and RBI’s change of rules in minimum public shareholdings.

FMCG CNX had formed a Symmetrical triangle now; It had not given any directional breakout.

Analysis on HUL

The Stake rise news had created a fluctuation thus forming a Descending Triangle pattern, which had also given a negative breakout.  Along with it we are also seeing a divergence now, and forming a reversal pattern.

The stock is not an attractive stocks for analyst and many find ITC to be a good bet, as the P/E & Earning for FY15(Expected) to be good comparatively good. Both RSI as well as MACD has shown some divergence.

I am not a pharmabull. But, I want to play it technically. Buy if HUL give a positive breakout. I see this stock to be bullish and the stock is expected to move up to 680/725, if it fails to give any breakout the stock find its support at 484/434. 

Best financial documentaries to watch in your MBA

The documentaries/films below are by personal collection and are available on \\Swagat (Intra-college network available only for Bapuji B-schools students ). They are basically the documentaries seen by me on recommendation by fellow friends, well-wishers and few browsing over internet .

The documentaries are as follows

·         Inside Jobs: A wonderful documentary on financial crisis 2007-9. The documentary is divided into 5 parts and a very informative documentary concentrating on every aspect of 2007-9 crises. The documentary throw light on

·         The Ascent of Money: This an Ultimate finance film by a Harvard professor Niall Ferguson's. The film not only speaks on bubble but on all aspects of money, starting from the ancient money to e-money. The film was shown on History Channel in 6 frequent episodes.

·         Too Big to Fail: This was the film that I found digging Dr.Garag’s treasure on swagat(Intra-college network available only for Bapuji B-schools students ). An wonderful film on Leman Brothers collapse. It discuss on minute by minute details of Leman’s fall.

·        






 Rogue Trader: A film on Baring Banks collapse. It show how  Nick Leeson made  unapproved financial transactions. The film is a dramatic form of a documentary 25 Million Pounds.

·         25 Million Pounds: The best film to watch; not only for Finance students but for Human Resource. It speak very fine details of  Nick Leeson dobby accounts and fake transcripts.

·         The Midas Formula:  The documentary is by BBC and an details film on  Black–Scholes formula. Black Scholes is an option pricing model, The Ascent of money have a specific episode on Black Scholes and its failure. Black Scholes model is yet to be discussed in next year of Risk Management (VTU).

·         Million Dollar Traders: the film is on Rookie Traders in financial crises of 2007-9 Lex van Dam.  Lex van Dam is a turtle and is been trained by Richard Dennis. A wonderful film if you want to in invest/ trade in stock market. The film is basically based to showcase every aspect what it takes to be a trader.

·         FIAT EMPIRE - Why the Federal Reserve Violates the U.S. Constitution: finding time to watch. for more details click here

Dewan Housing Taps Debt- ECB Market

Dewan Housing Finance Corporation Limited has come up with an exciting issue of Perpetual NCDs in the Private Placement.

DHFL is amongst the few housing finance companies dedicated to provide housing finance to Lower and Middle Income (LMI) segment of the society. Presently it is the Second Largest Housing Finance Company in the private sector with an integrated network of 140 branches, catering to Semi-Urban and Rural belts of India.

Most of the branches of DHFL  are in the areas where neither the private sector banks nor large HFCs are present, thereby effectively eliminating the Rate Led Competition.

This advantageous position of DHFL enables it to exploit the huge growth opportunity arising from low cost housing segment viz-a-viz other industry players.

DHFL enjoys an AUM of over 24000 Crs. With a net NPA being 0% . Unlike other players, DHFL‘s branch staff interacts directly with potential customers thereby assessing their requirements and then design the solution. This unique marketing feature helps them avoid potential defaulters.

Housing loans sanctioned during the nine months ended 31^st December 2012 amounted to Rs. 3922.13 Crs. As against Rs. 3189.53 Crs. During the previous corresponding period showing an increase of 23%. Disbursements during the same period amounted to Rs. 2893.32 Crs. As against Rs. 2279.78 Crs. During the previous corresponding period showing an increaseof 31%.

In December 2010, DHFL acquired M/s Deutsche Post Bank Home Finance Ltd, having a home loan portfolio of approx. 4800 Crs. And was enjoying a AA+ credit rating.

DHFL as a company has a credit rating of AAA

Here are the issue features: Issue closes on 30^th September 2013

Issuer	Dewan Housing Finance Corporation Limited.
Instrument	Rated, Listed, Perpetual NCDs
Issuance Mode	Dematerialized Form
Credit Rating	"BWR AA+" by BRICKWORKS and "CARE AA-" by CARE
Issue Price	10,00,000 /-
Minimum Application Size	30,00,000 /-
Listing	On the WDM segment of N.S.E.
Coupon Rate	Monthly	Quarterly	Annually
	12.05%	12.18%	12.75%
Annualized Yield	Monthly	Quarterly	Annually
	12.74%	12.75%	12.75%
Call Option	To be exercised by the issue At the end of 10th year whether to redeem the NCD or step -up the interest rate
Step - Up in interest	Monthly	Quarterly	Annually
	220 bps	225 bps	250 bps
Issue Closing Date	Issue closes on Monday i.e. 30th September 2013

Mentioned below is the financial snapshot:

STANDALONE ANNUAL PERFORMANCE

PARTICULARS	31-Mar-11	31-Mar-12	31-Mar-13
Share Capital	104.43	116.84	128.22
Net Worth	1548.43	2032.72	3237.09
Total Income	1451.24	2469.68	4140.35
PBDIT	1274.32	2192.14	3738.49
Profit Before Tax	341.48	398.41	610.68
Profit After Tax	265.13	306.41	451.85
PBDIT(%)	87.81	88.76	90.29

STANDALONE PERFORMANCE FOR THE FIRST QUARTER

PARTICULARS	30-Jun-12	30-Jun-13
Total Income	738.82	1126.64
PBDIT	661.33	999.31
Profit before Tax	104.63	159.03
Profit after Tax	77.83	120.3

Strategy for Gold on FOCM meeting

Today all eyes are on FOCM meet to be held. Not only commodity and Gold but Forex and stock market will have implication of the meeting which is to be held today or tomorrow(Source: Business Standards). Anticipating strategies for gold, all eyes are on tapering of bonds by fed. Many experts believe that Fed will come up with taping of bond buying program. If it happens gold will loose value globally.

Technical

An open up candle followed by a bearish engulfing had given a clear indication of a possible bearish trend 28k &26K are the good supports as seen in technical charts. More clarity will be seen after fed's bond buying strategy.  

Gold what's next??

I never expected gold above 32,500. Since June-July I am giving regular updates on my blog on a special request. After formation of a  expanding triangle, gold had reached 34,500 testing a new height. After a breakout of 32,500. The sustainability was not seen , after a negative reversal gold reached its climax; starting a correction.

Know we have a question where do gold find its support. Currently we have 2 major supports and 2 trend-lines. But 30,000(50%; fib) is found to be next level, if it fail. We can see gold 27,800-28,000 as a powerful support.

 Fibonacci levels

Major SAR

Gold can be a good investment if we witness any reversal at 30,000 levels. We may see gold again touching 34,500/ testing new heights.

To read previous article on Gold: Click here

Beta and Correlation

It was my 2nd class of risk management yesterday. During a calculation I saw that  beta's formula  is identical to correlation. Searched out some resourceful stuff form internet.

  Beta Definition
Beta is a measure of the systematic, non-diversifiable risk of an investment

A misconception about beta is that it measures the volatility of a security relative to the volatility of the market. If this were true, then a security with a beta of 1 would have the same volatility of returns as the volatility of market returns.  In fact, this is not the case, because beta also incorporates the correlation of returns between the security and the market.

    Beta = Correlation of Asset to Market * (Std Dev of Asset / Std Dev of Market)       

For example, if one stock has low volatility and high correlation, and the other stock has low correlation and high volatility, beta cannot decide which is more risky.
Beta sets a floor on volatility.  For example, if market volatility is 10%, any stock (or fund) with a beta of 1 must have volatility of at least 10%.

Another way of distinguishing between beta and correlation is to think about direction and magnitude. If the market is always up 10% and a stock is always up 20%, the correlation is 1 (correlation measures direction, not magnitude).  However, beta takes into account both direction and magnitude, so in the same example the beta would be 2 (the stock is up twice as much as the market).

Correlation Definition
Correlation – measures the degree to which two variables relate to each other.  It’s a standardized measure (unlike Covariance) of the strength of the linear relationship between two variables.  When you say that two items are correlated, you are saying that the change in one item effects a change in another item.

    Correlation = Covariance of Asset to Market / (Std Dev of Asset * Std Dev of Market)

Beta and Correlation both measure the relationship between 2 variables. If you study the formulas you will see that correlation is just covariance expressed as a normalisation of covariance - that is it is scaled by the standard deviations of the 2 variables. Beta is however the Covariance of the 2 assets divided by the variance of the benchmark asset.

Intuitively what it really means is Beta is distinct from correlation in that correlation is more indicative of direction, while beta is also incorporating magnitude. If we say a market is up 15% always and the stock is always up 30%, then the correlation will be 1. However as beta gives us both the direction and the magnitude we would get a beta of 2.

Source:

http://risklearn.com/questions/?qa=33/what-is-the-difference-between-beta-and-correlation

http://cpacfa.squarespace.com/beta-correlation-and-covarianc/

Gold; Where is it?

Gold has become a huge political issue. In spite of many artificial measures to stop import of gold, government has miserably failed. This eventually led to the domino effect in the entire Indian Financial Markets.

We are currently seeing Gold at upper level the RSI is giving a caution signal and we have 2 major resistances ahead. It’s a high time for gold, the trend-line which was broken by gold during the end of March and the upper level resistance @32,500.

We are seeing signals from gold of a possible correction. Which will start from the first week of next month or prior. 

If gold is able to give a breakout and sustain the breakout gold is again a screaming buy.

For previous article on gold; Click Here